No matter how safe and secure you feel in your home, it's a fact of life that bad things can happen at any time -- floods, fires, sinkholes, theft. And that's why homeowners insurance is a must. But how much does it cost? The average annual premium runs about $952, but a bunch of unique factors can go into calculating a specific quote, and that information could help you get a lower rate in some cases.
Got it? Let's look at the things that make a difference in how much you'll wind up shelling out:
Age and condition of your home
This includes everything from a house's roof to its pipes, heating system, and electrical wiring. For instance, the lead and galvanized pipes found in older homes "result in higher premiums as they are more prone to cracks or leaks than the copper and plastic piping used in newer homes," says Paul Boudreau, insurance broker at Rowat Insurance.
Price to rebuild per square foot
Since homeowners insurance claims often require rebuilding whatever part of your home succumbed to fire, flooding, or other disaster, most insurance policies factor in the price per square foot to rebuild in your area based on current construction rates. While the national average is $95.51 per square foot, the overall cost of policies can differ drastically.
It's important for your agent to do a reconstruction cost estimate to ensure "the proper rating for building materials," says Jason Pesch, owner of a local insurance agency in Scottsdale, AZ. While most policies pay replacement cost (the cost to rebuild a home), some pay only the depreciated current value for the whole house.
Probability of insurance claims in your area
"If your home is located in an area prone to tornadoes or forest fires, you're going to have a higher premium due to a greater risk of damage," says insurance expert Michael Senderovich. In other words, the more known risk there is to your home, the stiffer the premium.
For example, the annual cost of insuring a home in Louisiana is $1,722 -- the nation's highest due to the claims filed after Hurricane Katrina. (The state with the lowest price: Idaho, averaging just $534.)
Since every standard policy excludes coverage for natural disasters like earthquake and flood, be sure to check with your agent to see if you need the extra coverage. Note that the cost of those add-ons could easily exceed the price of your homeowners policy.
Your credit score, age, and other personal info
You -- yes you -- also factor into how much you'll ultimately pay in homeowners insurance. According to Erin Wenzel, account manager at Michigan's Provision Insurance Group, everything from your credit score, marital status, age, level of education attained, and frequency of claims submitted on prior insurance policies will increase or decrease your rate. (Hint: A higher credit score and few or no claims usually result in a lower rate.)
Whether your home has recreational (and risky) amenities
A home with a swimming pool, trampoline, or certain other "fun" features signals risky business to an insurance company -- and your price quote will reflect that. Same goes for homes with pets or farm animals that could be dangerous (e.g., large dogs or horses).
Increasing home prices
Inflation or the increased value of your home in an upmarket may cause your premiums to increase each year.
Safety features in your home
You may be able to snag a discount if your home has a nifty feature that an insurance company may find attractive like storm shutters, security systems, or carbon monoxide detectors. If your home doesn't have these, consider upgrading.
"Installing a security system for $30 per month may reduce your premiums by at least that amount -- and provide additional safety for your family at the same time," says Wes Taft, co-founder of moveCHECK.
How to lower the cost of homeowners insurance
However painfully obvious this advice may seem, you should shop around for homeowners insurance. Many consumers go with the first quote they get in order to cross one more thing off their list during a move or the home purchasing process. And it's a big, costly mistake.
"An informed insurance agent that can shop your home with multiple insurance carriers is your best bet at finding a great rate for your home," says Wenzel. Ask the agent to explain why the premiums are different and what the trade-offs are.
And this isn't just something you should do when you first buy a home, but every year.
"Make an effort to get a new quote each year, and shop around if you're not happy with your current rate," Taft says. Insurance companies hungry for new business offer competitive rates.